Subprime Loans: Social Responsibility and Current Measures Taken

     What organizations that participate in such unscrupulous acts don’t understand is that when you bring down the value of your customer, you also bring down the value of your overall image and product. According to Cohen (2009), social responsibility is when “every organization must assume full responsibility for its impact on employees, the environment, customers, and whomever and whatever it touches”. If that is the case, then subprime lenders must acknowledge how ruthless and unethical their practices are to the community. How many times have you purchased something based off of the amount of ratings or likes it had?

     If you have a bunch of people calling your company a scam, do you really think more people would be willing to do business with you, even if you have money to lend? A prime example of this would be Synchrony Bank (formerly known as GE Capital). Synchrony Bank just finished losing a class action lawsuit about racial discrimination. They were found to be systematically denying people lines of credit based off their names, pictures (via social media), how they sounded over the phone, forms of identification to seek credit (IDs), and by even the neighborhoods that they lived in.

     Synchrony Bank was also found to be randomly reversing the credit extended to melanated people, even when they had no balances owed, and when nothing warranted the closing of the account to begin with. The reputation of GE Capital was so tarnished to where they had to change their name to Synchrony Bank, back in 2014. Lenders hold a social responsibility to uplift the community, and not hinder it, by closing accounts, allowing for inquires to build up on your credit report after illegally denying you, and intentionally ruining your credit.

     The results of failing to be socially responsible are that many people within the community suffer. According to consumerfinance.gov (2014), “over 750,000 consumers were harmed by illegal, deceptive and discriminatory credit card practices behind GE Capital“. The consequences of failing to be socially responsible, for GE Capital, is that they were ordered by the Consumer Financial Protection Bureau (CFPB) to pay $225 million in relief to consumers harmed by their disgusting practices. Measures that have been taken to ensure that this doesn’t happen again, is on CFPB’s end. They made it their business to educate consumers on how to report these issues; so sickening acts (like with GE Capital/Synchrony Bank) don’t continue to go on for as long as they did. But, Synchrony Bank is not the only company participating in reckless, unscrupulous, and greedy subprime lending acts. According to Thiel, Bagdasarov, Harkrider, Johnson, and Mumford (2012), "Corporate and financial misconduct amidst the recent world financial crises, such as the predatory subprime lending practices of Ameriquest, Goldman Sachs, and IndyMac Bank, have left few wondering whether ethics in leadership should be of greater focus moving forward (Muolo and Padilla 2010; Paletta and Enrich 2008)". If corporate businesses started seeing being morally and ethically correct as a trend, social responsibility would actually be successful within this society.